Tourism industry faces collapse as insurance companies refuse to pay Covid-19 claims
Cape Town - The South African tourism and hospitality sector is facing collapse because insurance companies refuse to pay them for losses related to the Covid-19 lockdown, even though they’re insured against “business interruption”.
According to Insurance Claims Africa (ICA) chief executive Ryan Woolley, rejected claims are affecting the tourism industry and hospitality sector, with hundreds saying they should be covered under “business interruption”.
“These businesses all bought pricey business interruption insurance policies - that included extensions for claims arising from infectious diseases or contagious notifiable diseases - from Santam and a number of other insurers. Covid-19 qualifies as a declared notifiable disease, yet insurers are either rejecting the claims, or frustrating the process by making it near impossible to claim,” Woolley said.
The tourism and hospitality sector sustains over 740000 direct and 1.5million indirect jobs, and contributes 8.6% to GDP. It is also the lifeblood for many micro and small enterprises, creating mass employment opportunities across the country. The sector has been out of business since March, when the national lockdown started.
Last week it emerged that Santam has rejected a business interruption settlement proposal, from more than 400 tourism and hospitality operators, relating to the Covid-19 pandemic.
Santam has denied it.
Santam spokesperson Thabo Mabaso said: What we are seeing is that a number of our policyholders were forced to close their businesses at the start of the national lockdown. The national lockdown is not covered by our policies, so they would not be able to make a successful claim. It is a requirement, in terms of the policy, that the business is directly affected by a case of Covid-19. For example, if a policyholder ran a hotel and one of their workers or guests became infected with Covid-19, forcing them to close their operations, then they would have a claim for as long as it took them to clean their premises and return to operations. Santam is currently processing a number of Covid-19-related business interruption claims and we are committed to quickly paying all valid claims that meet the definition of loss described in our policies.”
Tourism Business Council of South Africa (TBCSA) chief executive Tshifhiwa Tshivhengwa said: “It’s a huge problem and what makes it massive is that they have business interruption insurance, so that they are compensated for their loss. Many insurance companies are hiding behind this lockdown and are refusing to pay. We have to deal with this issue even if we have to go to court. We are talking about thousands of businesses.”
Chief executive of the Federated Hospitality Association of Southern Africa (Fedhasa) Lee Zama said the rejection by insurers of Covid-19-related business interruption insurance claims of the hospitality industry will directly contribute to further job losses in the sector, worst hit by the pandemic.
“Many of our members took out expensive business interruption insurance policies, with specific extensions to cover notifiable and infectious diseases. They have been paying their premiums and, when the pandemic hit, believed that these policy payouts would be the much-needed lifeline they had planned for, only to discover their insurers walked away from their legal obligations,” Zama said.
OUTsurance head of client relations Natasha Kawulesar said they have settled 84 claims in the hospitality and tourism sector.
“Based on the current payments, the average payment is just above R400000. Most of our claims have been from the hospitality industry. We started paying claims in April for March losses and by late April - where clients had not claimed and had the appropriate cover - we started calling them to help submit claims. We have reserved R220million for the payment of business interruption extended cover claims. We have settled 135 claims and paid out R37million thus far,” she said.
Chief executive of the Ombudsman for Short-Term Insurance, Edite Teixeira-Mckinon said they have received a number of complaints.
“Around 200, from the lockdown up until now. We register around 900 complaints per month. From the complaints so far, these claims were rejected because the policies do not cover infectious or contagious diseases and, in other claims, because specific requirements for cover have not been met, according to insurers,” she said.@MarvinCharles17